Family trust discretionary beneficiaries cannot challenge trust operations; they have no precise right to trust assets, only an ‘expectancy’ of possible future benefits. Deidre Little was forced to bear the over $70,000 cost of failed family trust litigation forming part of a bitter matrimonial dispute.
Deidre and John Little separated in 2013 after eleven years marriage. They were then joint trustees of a family trust owning a home at Woodside Crescent in the Auckland suburb of St Heliers, a commercial property in Ellerslie and shares in a company importing children’s products. Mrs Little’s moves to have her former husband removed as trustee saw both removed by the High Court and corporate trustee Howick Trustee DL Ltd appointed as independent trustee. A 2015 agreement following a formal process of mediation was supposed to settle all their relationship property disagreements. All assets of value were held in their family trust. The mediation set out procedures for the trustee to divide these assets. The High Court was told Mrs Little subsequently considered herself not bound by the mediation agreement. She sued to have Howick Trustee DL removed as trustee.
Justice Brewer ruled she was bound by the agreement and further she had no standing to question Howick Trustee’s operation of the trust. As a discretionary beneficiary, Mrs Little has a ‘mere expectancy’. This is not a beneficial interest entitling her to interfere in trust operations, Justice Brewer ruled. There is a Bill currently before parliament which will allow discretionary beneficiaries to sue, he pointed out.
Mrs Little was held liable for the costs of what Justice Brewer called wholly unnecessary litigation. These costs are to be deducted from her share of trust assets. Howick Trustee DL had the court approve a division of trust assets with roughly $503,000 going to each of two new family trusts controlled separately by Mr and Mrs Little. The court was told $465,000 was previously paid to each of Mr and Mrs Little following the sale of Woodside Crescent.
Little v. Woodside Trust – High Court (27.07.18)
18.151